The airline’s soaring debt is a huge worry, but a successful brand differentiation strategy can play a key role in future
Kingfisher Airlines is just short of five years in operation. But the flamboyant Vijay Mallya’s airline has given all its competitors a run for their money as far as mind space is concerned – be it the swelling debt, or the acquisition of Deccan Airlines.
It was a surprise when the airline said earlier this month that it plans to raise Rs 300 crore of debt in the near future, which will increase its current debt book to around Rs 7,800 crore — a leverage of almost 25 times. The airline posted a loss of Rs 420 crore in the third quarter ending December 2009 and like all airlines has gone through turbulent weather (paring growth, deferring deliveries of new aircraft etc) in 2009.
“The company is sitting on a high leverage which affects its valuation in the short run. However, the current valuation of the airline gets support from its strong brand image in the form of intangibles,” Manish Saigal, partner, KPMG
The king of good times, as Mallya is known as, is obviously banking on the intangibles. Kingfisher is now the largest single domestic carrier with a market share of 23 per cent at the end of March, 2010 and operates close to 400 flights a day covering 70 destinations with a fleet size of 66 aircraft. It is all set to expand its presence in the global highly competitive network where it will be taking on mature and established global carriers.
The company has plans to double its fleet strength by adding 67 more aircraft by 2016, according to an investor presentation, which also says that Kingfisher will increase the total number of international flights to 14. The company also plans to raise funds through issuance of Rs 440 crore worth of global depository receipts (GDRs).
Aviation analysts agree Kingfisher has been able to create a brand differentiation despite the trouble it has gone through. As Mallya says, the “‘Fly the Good Times’ approach reflects in the experience we offer to passengers. With costs lower than economy class travel on full service airlines and marginally more than the ‘bus services’ type low cost competition, Kingfisher offers a far better value proposition.”
On its core values of lifestyle, trendy and youth, Kingfisher has leveraged the equity of the mother brand Kingfisher.
The airline has a clearly defined target audience- SEC A, SEC B+ (socio-economic class) in the age group of 25-45 years of age. This segment has travelled extensively and is aware of international travel trends. They are modern, trendy and upwardly mobile, looking for a great flying experience.
The team at Kingfisher Airlines also believes that a consumer does not select a brand in isolation. Taking this insight forward, an extensive on-ground activation hums all year round that is aimed at communicating the Good Times experience of Kingfisher Airlines outside the air travel context as well.
Such is the impact of this marketing blitz that despite the poor financial health of airline, the brand has intrinsic value attached to it. However, analysts say Kingfisher Airlines has not only benefitted from its association with UB brand, but also its seamless efficiency has a lot more contribution in building up this brand image.
“The seamless efficiency in the form of good connectivity, wide coverage, pre-boarding service and post-flight service help it to create such positive image,” Harish Bijoor, chief executive officer of a brand consultancy firm, Harish Bijoor Consults Inc said.
However, the integrated branding approach followed by Kingfisher has also certain risks associated with it. “Integrated branding has its risks like if one brand gets a negative image, it hurts other brands of the company,” KPMG’s Saigal says.
Saigal also says that Kingfisher Airlines’ image as a lifestyle brand didn’t go well for Kingfisher Red- its low cost wing and the company should distinctly advertise for this segment.
However, Kingfisher officials say that the airline provides the same quality of service to all segment of its consumers and there is no need for a different branding strategy. “Our focus on both Kingfisher and Kingfisher Red is to offer our consumers the best value for their money. So, we provide a ‘five star’ experience even on Kingfisher Red, albeit at a lower cost,” an official of Kingfisher Airlines says.
